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A small business, such as a neighborhood bakery, usually does not have the resources to launch mass-marketing campaigns. By carving up the addressable market into smaller segments, a small bakery can focus its resources on niches that the larger bakeries may not be addressing. The market segments should be measurable and large enough to generate consistent profits and justify the company's marketing and other investments.

Geographic

Geographic segmentation criteria include region, climate and population density. A small bakery in a suburban community may serve just the local residents. Using population estimates from the latest census and information on the competitive structure from the local chamber of commerce, the bakery can estimate the number of potential customers and plan its operations accordingly. By putting up an online order-entry system and contracting with part-time delivery people, it may also be able to supply custom cakes and other products to locations outside its normal geographic area.

Demographic

Demographic segmentation criteria include age, gender, family status and income. Younger customers may order pastries from a bakery, while families may drop by for breads and rolls. Orders for tiered cakes for birthdays and other special events may come from high-income households. The product mix and pricing strategy would depend on the location and the competitive environment. For example, a bakery in an upscale neighborhood may decide to offer more pastries and custom cakes in its stores than breads and rolls, which should mean higher margins but lower volumes. In a working class neighborhood, a bakery may offer more bread, rolls and other items in the low end of the price range than pecan pies, custom cakes and other expensive items. The margin on each item may be less, but the bakery should generate high profits if it sells enough items.

Lifestyle

Lifestyle segmentation criteria include consumer attitudes and perceptions. Some customers may believe in the importance of a gluten-free diet, while others might be interested only in high-fiber breads and rolls. During periods of distress and uncertainty, some may turn to cupcakes or crullers as comfort food. Customers who are looking for very specific items may be willing to pay a premium price, which could represent higher profits for the bakery.

Other Segments

Time and price are some of the other segmentation criteria. If a bakery is located near a business park, for example, most of its customers are likely to be office workers dropping in for a breakfast muffin, a sandwich during lunch and pastries to take home after work. If the bakery has spare capacity, meaning times during the day when the staff is not busy attending to customers, it may consider catering to special events, such as weddings and anniversaries. The price points and margins for custom orders may be higher than everyday items, which is a net positive for the bottom line.

About the Author

Based in Ottawa, Canada, Chirantan Basu has been writing since 1995. His work has appeared in various publications and he has performed financial editing at a Wall Street firm. Basu holds a Bachelor of Engineering from Memorial University of Newfoundland, a Master of Business Administration from the University of Ottawa and holds the Canadian Investment Manager designation from the Canadian Securities Institute.

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Basu, Chirantan. "What Is the Market Segment of a Bakery?" Small Business - Chron.com, http://smallbusiness.chron.com/market-segment-bakery-21308.html. Accessed 14 September 2019.

Basu, Chirantan. (n.d.). What Is the Market Segment of a Bakery? Small Business - Chron.com. Retrieved from http://smallbusiness.chron.com/market-segment-bakery-21308.html

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